Behavior Of Momentum Following And Contrarian Market Timers
AbstractI analyze the behavior of a group of investment newsletters that provide explicit recommendations about the fractions of investment holding that should be allocated to risky and riskless asset classes. I find that the group of newsletters exhibit few types of simple behaviors and a majority of them can be classified as either momentum follower or contrarian. My analysis also shows that portfolios recommended by both momentum following and contrarian newsletters are capable of outperforming a fully invested benchmark portfolio. The newsletter recommended portfolios have positive Sharpe ratios, lower beta with respect to the market and a positive Jensen's alpha. Overall, these results indicate that by using simple trading strategies and proper timing, some newsletters are able to exhibit superior performance. The results also provide empirical support for models that posit feedback based investor behavior and provide a useful parametrization for researchers modeling investor behavior.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm113.
Date of creation: 21 Jan 1999
Date of revision:
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.